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# Sleeping tight may get costly
- URL: https://www.smdp.com/sleeping-tight-may-get-costly/
- Published: 2004-08-21T15:00:00.000Z
- Updated: 2026-10-23T04:54:00.000Z
- Author: Guest Author
- Tags: Government & Politics, Downtown, #archive-import

*Hoteliers losing sleep over potential tax hike*

*By JOHN F. MULLER Special to the Daily Press*

DOWNTOWN — For some local hotel owners, the passing of a November ballot measure to tax the local tourism industry could translate into tens of thousands of dollars in lost profits. For others, the initiative, which could raise $3.5 million annually for the city, represents a logical step that could do a lot of good for the hotel and tourism industries if spent correctly.

Regardless, industry officials agree the initiative is too complicated and too vague, not explaining to voters exactly where additional revenue raised by the tax would be spent.

At 12 percent, Santa Monica’s hotel bed tax— the tax assessed to hotel visitors on a nightly basis — is expected to generate $18.5 million for City Hall this year. The measure, which was unanimously placed on the ballot earlier this month by the City Council, would increase the tax rate to 14 percent and increase nightly rates at local hotels by an average of about $4.

With the new dollars, the city should be able to more easily balance the budget for the current year and 2005-2006\. It would also help fund the city’s public schools. With an additional $3.5 million, City Hall could cover its stated ambition of giving an additional $6 million to the schools each year for the next five years.

However, it is feared that raising the tax could turn away some potential business, especially travel agents who buy package deals in bulk for foreign tourists. The city’s current tax is lower than the taxes in a number of surrounding cities, including Beverly Hills, Marina Del Rey and West Hollywood.

It could also deal a significant blow to medium-sized Santa Monica hotels that have booked foreign visitors in travel packages at set rates. For large hotels that do not offer such packages, individual tourists will pay the increase in tax as they rent out new rooms. At the medium-sized hotels that do, hotel owners will have to pay the tax out of their own pockets for all the packages they have already sold, because they can’t renegotiate them in order to accommodate for the new tax level.

For Hotel Carmel on Broadway, which does 60 percent of its business in pre-sold packages to international tourists, an increase in tax could mean losses of tens of thousands of dollars.

“I know the City Council was thinking that this was an easy source to average the budget, and I’m not opposed to having hotels pay their fair share,” said Sherry Kellogg, the hotel’s general manager. “Our gripe is the process. We weren’t really given any notice, and when they said it’s going to vote in November it does hurt. We work way in advance in order to promote the city of Santa Monica as a destination, and on top of that we have to deal with this (tax increase coming out of our own pockets).

“It’s going to devastate us. It’s like a slap on both cheeks.”

Hotel Carmel has packages pre-sold until March 2006\. If the measure passes, the rate will pop up to 14 percent in January 2005, forcing the hotel to swallow unexpected expenses for more than a year. Kellogg expressed frustration with how quickly the proposed measure would be instituted.

“To bring it to a vote and bring it so rapidly to fruition, in my mind, is unacceptable, because it limits the way we can do business,” she said. “You’re talking about a lot of money in a very short period of time.”

The city hasn’t changed its bed tax rate since 1989.

Larger hotel owners were also wary about the proposal, in part because it does not specify where the new funds will be utilized.

“I understand the need to increase,” said Francois Khoury, the general manager of the Doubletree Guest Suites Hotel on Fourth Street. “The only thing I would have liked to see is a predetermined amount allocated to the CVB (Conventions and Visitors Bureau) instead of the general fund where it could be used for anything. For them to justify the increase in bed tax, we need something to offset it by.”

City Councilman Bob Holbrook agreed that a portion of the money should be earmarked for the bureau if the measure passes, and stressed that the tax would also pump money into the city to be used to maintain city services that have been declining and fund the schools.

“It’s important that the operators of the hotels that have to charge higher rates receive a direct benefit from it,” he said. “We need to make sure that the visitors of the community are well served. The bureau could also help strengthen our position as a tourist destination, which would be well received by the hotel and tourism community.”

Misti Kearns, the executive director of the Visitors and Convention Bureau, said she was hopeful the city would choose to spend a portion of the new revenue on the bureau in the event the measure passes. In a 2000 economic impact study, the city found that the bureau helped bring $798 million into the city on a $968,000 budget. It currently receives $1.5 million annually.

“There isn’t any guarantee that the visitors bureau would receive any of it,” she said. “I do believe that the city is supportive of what we do and that they do understand the extensive impact. The bottom line is that tourism means jobs. Without further reinvestment of that money, we can’t be sure that we can maintain or increase that revenue stream.”

*Originally published in the Santa Monica Daily Press print edition on August 21, 2004.* [Read the original PDF.](https://s3.us-east-1.amazonaws.com/smdp%5Fbackissues/082104.pdf?ref=smdp.com)